The mobile app ecosystem is thriving. According to Gartner, worldwide mobile app revenue will exceed $15 billion in 2011. Distimo reports that in December 2010 alone, the top 300 free applications generated over 3 million downloads, ten times more than the paid ones. Gartner also points out that more than 80 percent of mobile apps are free. So this begs the question, if developers are offering their apps for free, how do they make money?
Developers looking to monetize their free apps can use in-app advertising, in app purchases, or a freemium version.
With the predictions for the mobile advertising space to hit $5.4 billion by 2015 in the U.S alone, mobile advertising is the way to go.
At inneractive, we specialize in generating more revenue from mobile apps by optimizing over 60 global ad networks and local agencies in one simple SDK. Through our work, we have learned many crucial lessons about what works in mobile advertising.
Mobile Ads 101
The following concepts are crucial to understanding mobile advertising:
- eCPM (Effective cost per mille): The revenue the developer receives per every 1000 impressions.
- CTR (Click-through rate): This is obtained by dividing the number of users who clicked on an ad by the number of total impressions. The primary contributor to a high CTR is the relevancy of the ad and the ad placement strategy. In order to increase the relevancy of ads, the campaign should be of a premium and local nature: You want to display ads to users in their native language, and the topic of the ads should be relevant to the type of app in which the ad appears. In terms of the ad placement strategy, the location and format (text vs banner) of the ad also have a significant effect on the overall CTR. For this, it is important that you work with a company that will walk you through the process following the integration in order to maximize the effects of the ads.
- Global Fill Rate: The percentage of the total ad inventory that is populated by paying ads. Due to many different factors, in some instances ads will either not appear at all, or a “house ad,” essentially a self-promotional ad, will appear in its place. If your app has a 100 percent global fill rate, out of which 60 percent are house ads (a common number in this case), you are essentially leaving that 60 percent of your potential revenue on the table. In fact, a lower fill rate with all “paid ads” is more effective than a high fill rate with house ads. So don’t be misled by a high fill rate; the paid ads are the only ones that count.
Games generate more clicks
Let’s start with types of apps. Among the 300,000 iOS apps and the 200,000 Android apps, there are many different categories. There are games, utilities, tools, social, entertainment — the list goes on. Each app category has different results when it comes to its CTR.
Our stats indicate that in terms of CTR, the following categories are the top ones for developers:
- Arcade and Action
- News and Info
- Brain and Puzzles
We consistently find that games (which fall under both Entertainment as well as Arcade and Action) produce the highest CTR, which isn’t terribly surprising since a user is more likely to engage with an ad that appears in between levels of the game or on the Game Over screen, for example. If your app is social or is an eBook app, other revenue streams, such as in-app purchases, might be more relevant.
Focus on the primary countries
- South Africa
What this means for developers is that when designing and marketing your app, the above countries should be taken into account. That includes in app translations for the relevant languages and targeted marketing campaigns in those specific countries.
More tips to get more traction from your apps
These tips are crucial for maximizing your app revenue, but there are of course other tips we have found to be very useful in terms of gaining traction.
- Engage your audience with frequent updates and promotions. This keeps your audience interested and loyal. The obvious example of an app that excels at this is Angry Birds with constant and frequent updates.
- Develop cross-platform. Despite the buzz around one or two operating systems, it is extremely effective to develop a cross-platform app that supports OSes such as Symbian and BlackBerry. In fact, we have found that these platforms have higher CTRs, as users are not as “ad-blind” as iPhone or Android users. Generally speaking, we have found that the early adopter tech community pays less attention to ads than other types of users.
- Create web and native apps. While native apps are often more robust and responsive, Web apps using HTML5 can also yield a positive response from your audience. However, we have found that for games, the native model works better with faster response times and an overall more robust experience.
- Enable sharing. Give your users tools to easily share your app across their social platforms. Add some integrated options to tweet or share the app on Facebook. This will provide a very effective method of spreading the word about your app. Some good examples of this are news and info apps that have an option to tweet the article and the tweet then includes the name of the app.
In today’s super competitive mobile space, developers need an edge to get ahead of the competition. I hope these pointers provided that edge.
Related posts from GigaOM Pro (subscription req’d):
- Mobile App Developer Survey: Profiles, Platforms and Monetization
- How to Market Your iPhone App: A Developer’s Guide
- Report: The In-App Advertising Landscape